(Adds detail from report about potential proxy fight)
By Liana B. Baker, Soyoung Kim and Nicola Leske
NEW YORK, Dec 16 (Reuters) - Comcast Corp is
examining three scenarios for a potential deal with Time Warner
Cable Inc, including a full takeover bid for the
second-largest cable operator, people close to the situation
said on Monday.
Top cable provider Comcast is also considering whether it
could buy some selective Time Warner Cable markets, or team up
with another cable company besides Charter Communications Inc
to bid for all of Time Warner Cable, the people said.
Besides Comcast and Charter, privately held Cox
Communications Inc also has interest in a potential deal
involving Time Warner Cable, people familiar with the matter
have previously said.
Comcast, which has a market capitalization of roughly $127
billion, could ultimately decide not to do any deal, said the
people, who asked not to be named because they were not
authorized to speak with media organizations.
A full takeover of Time Warner Cable makes sense because the
company has geographic markets complementary to Comcast, while
taking on a partner would give them opportunity to pick and
choose key markets, one of the people said. Analysts say buying
all of Time Warner Cable would also face tough regulatory
Comcast is weighing all three options equally at this point
and would wait to see what kind of offer Charter comes up with
before pursuing any one of the options, the person added.
Comcast is being advised by JPMorgan Chase & Co on a
potential deal for Time Warner Cable, Reuters previously
Representatives for Comcast and Time Warner Cable declined
The potential entry of Comcast into a still-developing
bidding war could complicate months-long efforts by Charter and
its largest shareholder, Liberty Media Corp, to acquire
Time Warner Cable.
Charter, the No. 4 cable player in which Liberty Media owns
a 27 percent stake, is preparing to send an offer letter for
Time Warner Cable as soon as this week, valuing the larger rival
at below $135 per share, Reuters reported on Friday.
But it remains unclear whether the expected cash and stock
bid from Charter, which would provide little premium to Time
Warner Cable's current trading prices, would gain traction with
the larger rival's shareholders or its management. Charter has a
market value of $13 billion, which is much smaller than Time
Warner Cable's $37 billion market value.
Shares of Time Warner Cable ended 0.6 percent higher at
$132.09 on the New York Stock Exchange on Monday. Any bid would
need to be at least $150 per share to be considered seriously by
the company's board, a person familiar with the company's
thinking previously said.
DENVER SHAREHOLDER MEETING
Liberty Media's Chairman John Malone and its Chief Executive
Officer Greg Maffei met with some of Time Warner Cable's largest
shareholders in Denver last week and pitched the merits of a
combination with Charter, other people familiar with the matter
Attendees at the meeting included representatives from the
hedge fund Paulson, as well as institutional investors such as
Dodge & Cox, Capital Research and Wellington. A spokesman for
Dodge & Cox declined to comment while representatives from the
other shareholders as well as Liberty Media did not respond to
requests for comment on the meeting.
Some of the shareholders, however, told the executives that
they would not entertain a deal without a substantial premium,
some of the people said.
One of the Time Warner Cable shareholders in attendance, for
example, said they would not be interested in doing a deal for
less than eight times Time Warner Cable's 2013 earnings before
interest, taxes and amortization (EBITDA), the people said. A
deal at that multiple would imply a bid price above $140.
Time Warner Cable is currently trading at 7.6 times its 2013
EBIDTA, while Charter is trading at 9.5 times, according to
Brean Murray analyst Todd Mitchell.
Charter's multiple is viewed as inflated because it trades
more richly than the less than seven times multiple of Comcast's
cable unit, which is the most well-regarded cable operator by
investors, Mitchell said.
Malone is also gearing up for a potential proxy fight at
Time Warner Cable's annual meeting next year and held internal
discussions about drafting a list of directors, according to a
report in Bloomberg citing a person familiar with the situation.
A representative from Charter declined to comment about the
proxy fight while a representative from Liberty Media did not
immediately respond to a request seeking comment.
(Reporting by Liana B. Baker, Soyoung Kim and Nicola Leske in
New York; Editing by Gary Hill, Ken Wills and Lisa Shumaker)